Exhibit
10.3 Form of Secured
Convertible Note
"NEITHER THE ISSUANCE AND SALE OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES. "
Principal Amount
$
Issue Date: March ___, 2009
Purchase Price: $
SECURED CONVERTIBLE
NOTE
FOR VALUE RECEIVED, ATTITUDE DRINKS, INC., a
Delaware corporation (hereinafter called "Borrower"), hereby
promises to pay to _____________(the "Holder") or order, without
demand, the sum of _______________ Dollars ($____________), with
interest accruing thereon, on December ___, 2009 (the "Maturity
Date"), if not retired sooner.
This Note has been entered into
pursuant to the terms of a subscription agreement between the
Borrower, the Holder and certain other holders (the “Other
Holders”) of convertible promissory notes (the “Other
Notes”), dated of even date herewith (the “Subscription
Agreement”), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately
defined herein, all capitalized terms used in this Note shall have
the same meaning as is set forth in the Subscription
Agreement. The following terms shall apply to this
Note:
ARTICLE I
GENERAL PROVISIONS
1.1
Interest Rate . Interest payable on this
Note shall accrue at the annual rate of twelve percent (12%) and be
payable on the Maturity Date, accelerated or otherwise, when the
principal and remaining accrued but unpaid interest shall be due
and payable, or sooner as described below.
1.2
Payment Grace Period . The Borrower shall have a
five (5) day grace period to pay any monetary amounts due under
this Note, after which grace period a default interest rate of
twenty percent (20%) per annum.
1.3
Conversion Privileges . The Conversion Privileges
set forth in Article II shall remain in full force and effect
immediately from the date hereof and until the Note is paid in full
regardless of the occurrence of an Event of Default. The
Note shall be payable in full on the Maturity Date, unless
previously converted into Common Stock in accordance with Article
II hereof; provided, that if an Event of Default has occurred, the
Borrower may not pay this Note, without the consent of the Holder,
until one year after the later of the date the Event of Default has
been cured or one year after the Maturity Date.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to
convert the principal and any interest due under this Note into
Shares of the Borrower's Common Stock, $.001 par value per share
(“Common Stock”) as set forth below.
2.1.
Conversion into the Borrower's Common Stock .
(a) The Holder shall have
the right from and after the date of the issuance of this Note and
then at any time until this Note is fully paid, to convert any
outstanding and unpaid principal portion of this Note, and accrued
interest, at the election of the Holder (the date of giving of such
notice of conversion being a "Conversion Date") into fully paid and
nonassessable shares of Common Stock as such stock exists on the
date of issuance of this Note, or any shares of capital stock of
Borrower into which such Common Stock shall hereafter be changed or
reclassified, at the conversion price as defined in Section 2.1(b)
hereof (the "Conversion Price"), determined as provided
herein. Upon delivery to the Borrower of a completed
Notice of Conversion, a form of which is annexed hereto as Exhibit
A, Borrower shall issue and deliver to the Holder within three (3)
business days after the Conversion Date (such third day being the
“Delivery Date”) that number of shares of Common Stock
for the portion of the Note converted in accordance with the
foregoing. At the election of the Holder, the Borrower
will deliver accrued but unpaid interest on the Note, if any,
through the Conversion Date directly to the Holder on or before the
Delivery Date. The number of shares of Common Stock to
be issued upon each conversion of this Note shall be determined by
dividing that portion of the principal of the Note and interest, if
any, to be converted, by the Conversion Price.
(b) Subject to adjustment
as provided in Section 2.1(c) hereof, the fixed conversion price
per share shall be $.05 (“Fixed Conversion Price”) and
after all of the occurrence of an Event of Default, the giving of
written notice by Holder to Borrower of such occurrence and upon an
actual conversion under this Note, the per share conversion price
shall be the lesser of (i) the Fixed Conversion Price,
or (ii) 80% of the average of the three lowest closing bid prices
for the Common Stock as reported by Bloomberg L.P. for the
Principal Market for the date preceding a Conversion Date, but in
no event greater than the Fixed Conversion Price (such actual
conversion price being the “Conversion
Price”).
(c) The Conversion Price
and number and kind of shares or other securities to be issued upon
conversion determined pursuant to Section 2.1(a), shall be subject
to adjustment from time to time upon the happening of certain
events while this conversion right remains outstanding, as
follows:
A. Merger,
Sale of Assets, etc. If the Borrower at any time shall
consolidate with or merge into or sell or convey all or
substantially all its assets to any other corporation, this Note,
as to the unpaid principal portion thereof and accrued interest
thereon, shall thereafter be deemed to evidence the right to
purchase such number and kind of shares or other securities and
property as would have been issuable or distributable on account of
such consolidation, merger, sale or conveyance, upon or with
respect to the securities subject to the conversion or purchase
right immediately prior to such consolidation, merger, sale or
conveyance. The foregoing provision shall similarly
apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality
of the foregoing, the anti-dilution provisions of this Section
shall apply to such securities of such successor or purchaser after
any such consolidation, merger, sale or conveyance.
B. Reclassification,
etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the
same or a different number of securities of any class or classes
that may be issued or outstanding, this Note, as to the unpaid
principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted
number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common
Stock immediately prior to such reclassification or other
change.
C. Stock
Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the
Common Stock in shares of Common Stock, the Conversion Price shall
be proportionately reduced in case of subdivision of shares or
stock dividend or proportionately increased in the case of
combination of shares, in each such case by the ratio which the
total number of shares of Common Stock outstanding immediately
after such event bears to the total number of shares of Common
Stock outstanding immediately prior to such event..
D. Share
Issuance. If at any time while this Note is
outstanding, the Borrower shall agree to or issue (the “Lower
Price Issuance”) any shares of Common Stock or securities
convertible into or exercisable directly or indirectly for shares
of Common Stock (or modify any of the foregoing which may be
outstanding) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than the
Conversion Price, then the Conversion Price shall automatically be
reduced to such other Lower Price Issuance. For purposes
of the adjustment described in this paragraph, the issuance of any
security of the Company carrying the right to convert such security
into shares of Common Stock or of any warrant, right or option to
purchase Common Stock (other than Excepted Issuances) shall result
in the adjustment of the Conversion Price where such right to
convert is at a price lower than the applicable Conversion
Price. Common Stock issued or issuable by the Borrower
for no consideration will be deemed issuable or to have been issued
for $0.001 per share of Common Stock. The reduction of
the Conversion Price described in this paragraph is in addition to
the other rights of the Holder described in the Subscription
Agreement.
(d) Whenever the Conversion
Price is adjusted pursuant to Section 2.1(c) above, the Borrower
shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a
statement of the facts requiring such adjustment.
(e) During the period the
conversion right exists, Borrower will reserve from its authorized
and unissued Common Stock not less than an amount of Common Stock
equal to 150% of the amount of shares of Common Stock issuable upon
the full conversion of this Note. Borrower represents
that upon issuance, such shares will be duly and validly issued,
fully paid and non-assessable. Borrower agrees that its
issuance of this Note shall constitute full authority to its
officers, agents, and transfer agents who are charged with the duty
of executing and issuing stock certificates to execute and issue
the necessary certificates for shares of Common Stock upon the
conversion of this Note.
2.2
Method of Conversion . This Note may be converted
by the Holder in whole or in part as described in Section 2.1(a)
hereof and the Subscription Agreement. Upon partial
conversion of this Note, a new Note containing the same date and
provisions of this Note shall, at the request of the Holder, be
issued by the Borrower to the Holder for the principal balance of
this Note and interest which shall not have been converted or
paid.
2.3.
Maximum Conversion . The Holder shall not be
entitled to convert on a Conversion Date that amount of the Note in
connection with that number of shares of Common Stock which would
be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates on a Conversion
Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of
Common Stock issuable upon the conversion of the Note with respect
to which the determination of this provision is being made on a
Conversion Date, which would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock of the Borrower on such Conversion
Date. For the purposes of the provision to the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall
not be limited to aggregate conversions of 4.99%. The
Holder shall have the authority and obligation to determine whether
the restriction contained in this Section 2.3 will limit any
conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall
be the responsibility and obligation of the Holder. The
Holder may waive the conversion limitation described in this
Section 2.3, in whole or in part, upon and effective after 61 days
prior written notice to the Borrower to increase such percentage to
up to 9.99%.
2.4.
Mandatory Conversion . Provided an Event of
Default or an event which with the passage of time or giving of
notice could become an Event of Default has not occurred, then,
until the Maturity Date, the Borrower will have the option by
written notice to the Holder (“Notice of Mandatory
Conversion”) of compelling the Holder to convert all or a
portion of the outstanding and unpaid principal of the Note and
accrued interest, thereon, into Common Stock at fifty percent (50%)
of the Conversion Price, as adjusted, then in affect
(“Mandatory Conversion”). The Notice of Mandatory
Conversion, which notice must be given on the first day following
twenty (20) consecutive trading days (“Lookback
Period”) during which the closing price for the Common Stock
as reported by Bloomberg, LP for the Principal Market shall be
greater than Five Dolla
